The multi-factor min vol ETF basically starts by utilizing a smart beta indexing methodology to screen for factors that have proven to help enhance returns and then implement a low vol weighting methodology to potential better manage downside risks.
To put this in perspective, current popular low-vol ETF strategies only select and weight companies that exhibit the least volatility from a broader benchmark like the S&P 500. However, VSMV takes the initial first step of screening for smart beta factors like momentum, quality, value and growth before implementing a volatility weight.
“Other low-vol strategies don’t put input into consideration,” Dhillon told ETF Trends in a call. “Through a better input, you get a better optimized portfolio.”
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